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TMT · Equity
Xiaomi debuts in Hong Kong below IPO price
2018/07/09 05:55:17

Jul 09, 2018 (China Knowledge) - Chinese smartphone maker, Xiaomi Corp (stock code 1810.HK) officially lists on the main board of Hong Kong Stock Exchange (HKEx) today, with a market valuation of about USD 53.9 billion. The smartphone company is the first company to have a weighted voting-rights (WVR) structure which gives greater power to founders with minority shareholders., after Hong Kong altered its listing rules to attract more tech listings.

Shares of Xiaomi fell 2.35% from its initial price offering (IPO) price to HKD 16.6 on its debut as investors continue to weigh in on the effects of escalating trade dispute between US and China.

Xiaomi founder and CEO, Lei Jun spoke about the recent weakness in the Hong Kong stock market which saw nearly 70% of the newly listed mainland companies in Hong Kong in the first half of the year dipped below their IPO price.

"Because of the recent bad trend, short-term stock price is not the most important, and long-term price is the most important. The most important thing is to adjust the state of mind and do a good job in the company," he said.

The HKEx also announced earlier that it will launch the stock futures and options on the same day that Xiaomi lists and they will be immediately traded in the market today. In addition, Xiaomi has also been included as one of the designated securities on the approved short selling list. In other words, investors can sell short immediately on the day Xiaomi goes public.

The smartphone company broke through the RMB 100 billion revenue barrier in just seven years and became the world's fifth largest mobile phone manufacturer within a span of eight years. Even though its market value has halved from the previously USD 100 billion to USD 53.9 billion, its valuation is close to JD's market value of USD 55 billion.

Starting from 2015, the proportion of Xiaomi's revenue outside China has soared from 6% to 36% of Q1 in 2018, boosted by the India market, regarded as Xiaomi's "cash cow". According to IDC data, Xiaomi officially surpassed Samsung as India's largest smartphone brand in the fourth quarter of 2017.

Xiaomi was impacted by the weakness of offline channels in 2016. Its mobile phones began to see a sharp decline in sales under the siege of brands such as LeTV, Meizu, Vivo, Oppo, and Huawei Glory, dipping from 66 million units to 55 million units, which severely impacting the entire Xiaomi company. In addition, it also suffered from a lack of production capacity caused by supply chain problems at that time. In 2017, Xiaomi CEO Lei Jun led Xiaomi's mobile phone business to a remarkable turnaround in fortunes. The annual sales of Xiaomi's mobile phone climbed to the peak of 91 million from some 50 million in 2016.

With the global high-end market dominated by Apple, Samsung and Huawei and the country's two other smartphone maker, Oppo and Vivo also eyeing on a share of the piece, mobile phone business is facing an increasingly intense fierce competition in the market. While Xiaomi boosts an economic moat in mobile phone business from its high price / performance ratio, the increasingly heated competition in the mobile phone industry will further increase the pressure on Xiaomi's further increase the pressure on Xiaomi's R&D investment, marketing, and channel management.

At present, Xiaomi's core businesses are divided into three parts: smart phones, IOT and consumer goods (self-produced plus ecological chain) as well as internet services.

The company has invested more than 200 ecological chain enterprises, of which more than 90 produce intelligent hardware. Its IOT platform has connected more than 100 million devices (excluding mobile phones and computers) and is the world's largest internet of things device connection platform, accounting for 1.9% of the world's internet of things devices, exceeding Amazon's 1.2% and Apple's 1.0%.

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